This is Volume 18, Number 50 of the newsletter I have written weekly since March, 1997. This is the last time, however, that I will use the Clue meme as part of my weekly column. Starting next week, and going forward, we'll go straight to the column. Enjoy.
Not only are we getting stagflation instead of Depression, but we’re also finding ourselves, again, in a decade defined by energy. But while the 1970s were a decade of energy scarcity, this will become a decade of energy abundance.
Republicans want to credit fracking with all that has happened in our time. That technology has had an impact much like Obama’s Stimulus – it has accelerated changes already taking place. First natural gas went into glut, and this year oil went into glut.
Whether the glut is temporary or permanent, it’s permanent. Because the glut is giving alternative energy sources time and space to grow in. It’s also providing incentives for solar and wind to keep costs down, to keep innovating, because the ceiling under which they define “crossover” is a sinking one.
But oil’s ability to cut costs is not infinite. Crossover will come. It has already come in places where infrastructure for cheap delivery and use of fossil fuels is lacking. Crossover is already a reality in Africa, in most of Asia, and in much of Latin America. Solar panels don’t need the expensive (and fragile) infrastructure of the West to create energy, just as cellular calls don’t need the expensive (and fragile) infrastructure of the West to deliver Internet service.
What we have, then, is a bizarro version of the 1970s. We’re getting reverse energy shocks, which will, in time, reverse many of the changes we saw 40 years ago. Natural gas was the first energy shock, early in this decade. It killed coal in North America, which is a huge environmental game changer.
We’re now going through a second shock, with oil. This is a geopolitical game changer. Russia and the Muslim World are both losing power before our very eyes. This creates the time and space for real political change.
Texas is also losing power and influence over U.S. politics. Nothing will destroy the power of the Koch Brothers so thoroughly as an extended run of lower energy prices, because so much of what the Kochs own is tied to high commodity prices. The coasts gain, trading cities gain, technology gains, in the transformation now beginning in our economy.
The third, most important shock, of course, is yet to come. This is the renewable energy shock. Right now renewables represent only a few percentage points on the U.S. grid, but we’re on the verge of momentous change in this area. It doesn’t take many doublings from here to effect real change. Cheaper batteries will let utilities take all the wind energy that can be generated each night. Graphene will enable efficient fuel cells and make a “hydrogen energy cycle” a reality. Organic solar cells will make every window a solar energy producer, and dramatically reduce costs.
It’s hard to tell, at the present time, whether the third oil shock will come before or after the second has abated. My guess is it will happen after, which means there is still plenty of room for efficiency in the economy. Efficiency is the cheapest form of renewable energy, and does the environment just as much good as any other renewable.
The political benefits of this environmental turn will take time to be recognized, just as was the case in the 1970s. You’ll remember that the Nixon Thesis suffered grave interruption during that time, mostly at Nixon’s own hand. It turns out the same is true in reverse – take down the suburbs economically and they fight back politically.
But the next “sagebrush rebellion,” as the 1978 election cycle came to be called, will come from the cities, as the new majority and the new economy flexes its muscle for the first time. Will that happen in 2016 or 2018? I don’t know. But it will happen.
The reason is because economics drives the political train. The business of America is business. The business of America is change. Change is happening. It’s accelerating. It’s real. You don’t have to “believe” in it.